FAQs About 1099-K

New IRS form in 2012 that reports payment card transactions to the IRS and merchant under Internal Revenue Code section 6050W. The 1099-K going to the merchant is sometimes called a "payee statement" and must be provided by the reporting entity to the payee by January 31 of the year following the calendar year for which the return was made.

Each MID that meets the requirement detailed in Payee Box in the specific box section below will receive a 1099-K.

Section 6050W was added by section 3091 of the Housing Assistance Tax Act of 2008 and requires information returns to be made by certain payors with respect to payments made in settlement of payment card (merchant card) transactions and third party payment network transactions.

The PSE is the entity that sends the actual funds to the merchant.

The entity that submits the instructions to transfer funds to the account of the participating merchant is responsible for preparing and submitting Forms 1099‐K to the payee and the IRS.

The reporting is required by law. Third‐party information reporting has been shown to increase voluntary tax compliance, improve collections and assessments within IRS, and thereby reduce the tax gap.

The IRS requested that the phone number connect the merchant with someone knowledgeable about their payments. As the sales organizations, ISOs maintain customer service with the merchants and would be able to identify their merchants quickly and assist them with their payment histories.

The IRS is aware that gross amounts are being reported and will not equal your actual sales, due to fraud, credits, chargebacks, fees, etc.

Yes, the term "participating payees" includes any governmental unit as well as any agency or instrumentality thereof.

The de minimis standard exempts the reporting of transactions settled by a third‐party settlement organization of a payee in a third‐party payment network if the aggregate payments to the payee do not exceed $ 20,000 or if the aggregate number of transactions does not exceed 200 within the calendar year.

No, the de minimis standard does not apply to payment card transactions; the de minimis standard applies only to the payment settled by third‐party settlement organizations.

Under the regulations, a payment card is a card, issued to a cardholder that a network of unrelated persons has agreed to accept as payment under an agreement that provides standards and mechanisms for settling the transactions between a merchant acquiring bank or similar entity and the providers who accept the cards as payment. "Unrelated" means any person who is not related within the meaning of section 267(b) of the Internal Revenue Code, including the application of section 267(b) and (e)(3), or section 707(b)(1). The term "payment card" includes credit cards, debit cards, and stored‐value cards, as well as payment through any indicia of a payment card (such as a credit card number).

It depends. Purchases made with store cards or gift cards are not reportable when the card is accepted as payment by someone who is related to the issuer of the card (such as a subsidiary company or the company itself). Under these circumstances, the stored‐value cards do not fit the definition of a "payment card" and purchases made with such cards are therefore not reportable. However, purchases made with a stored‐value card accepted by a network of persons unrelated to the issuer and each other are reportable transactions. "Unrelated" means any person who is not related within the meaning of section 267(b) of the Internal Revenue Code, including the application of section 267(b) and (e)(3), or section 707(b)(1).

Section 6050W explicitly grants the Secretary the power to draft regulations to prevent duplicate reporting of the same transaction. The final regulations under section 6050W (the new payment card reporting requirements) provide that payment card and third‐party network transactions that otherwise would be reportable both under section 6041 or 6041A(a) and under section 6050W must be reported under section 6050W and not under section 6041 or 6041A(a). Relief has not been granted for reporting under any other Internal Revenue Code section.